In the past, most people started businesses with the express aim of maximising profit. However, in the last two decades, a new type of business has grown exponentially in popularity: the social enterprise.
A social enterprise is a business that focuses on people and the planet, as well as profit. Social enterprises tackle social and environmental problems, improve communities, provide access to opportunities and generally work to make the world a better place.
Creating a social enterprise can be a fulfilling, exciting endeavour. To succeed, aspiring social entrepreneurs need exceptional business and management skills. They need to understand what competencies they require and how to build them up, such as through advanced education in business and management.
What is a social enterprise?
When it comes to starting a business, many entrepreneurs are choosing to start a social enterprise. A recent report by the British Council suggested that globally, there are more than 11 million social enterprises.
Despite that striking figure, no national or globally agreed-upon definition of what a social enterprise is exists. However, it’s generally understood that social enterprises have these three features in common:
- A mission. A commitment to a social or an environmental mission is front and centre in the business, and equally important to the pursuit of profit.
- Products or services. A significant portion of income is earned by selling goods or services (as opposed to fundraising or taking donations, which is typical of not-for-profit organisations).
- Revenue for profit. Surpluses or profits are directed to the mission. It’s expected (and accepted) that social enterprises will make a profit however (which differentiates them from not-for-profits).
Social enterprises also differ from typical businesses or startups in other ways. Whereas a startup may have a visible leader and build a culture around the leader’s personality, a social enterprise usually has a mission that drives it.
Social enterprises are also more likely to be new businesses. The majority founded in or after 2010, making many less than a decade old.
Types of social enterprises
Fundamentally, social enterprises serve people and the planet and want to make an impact on the communities they serve that goes beyond simply profits and products. They can be classified into three types of models:
- Direct benefit model. These types of social enterprises create or support initiatives that add public value. They may provide services to disadvantaged people or help with other social causes.
- Cross subsidy model. This model provides services that respond to the direct market need and provide opportunities for otherwise excluded groups. They may support subsidised offerings to not-for-profit organisations or those undergoing financial hardship.
- Donation model. These social enterprises generate and use their revenue for donations towards other initiatives or organisations. They may give a portion of their profit to non-for-profit organisations or other charitable causes.
Five examples of Australian social enterprises
In discussing what a social enterprise is, understanding how they function in the real world is important. Since the definition of social enterprise is broad and spans across industries, there are many types of social enterprises that provide different goods and services.
Here are five examples of successful Australian social enterprises.
1. Vanguard Laundry
Vanguard Laundry is a Queensland-based commercial laundry service. Vanguard has more than 100 hospitality and health clients, including St. Vincent’s hospital, and is currently in negotiation with many other national and international clients.
From a social perspective, Vanguard is particularly focused on creating employment opportunities for those within its local communities through its purpose-built career and training centre. At present, it employs 52 people, with many more jobs planned for the future.
Vanguard Laundry reinvests its profits in helping the long-term unemployed transition back to work.
2. Who Gives a Crap
Who Gives a Crap is a social enterprise that manufactures and sells toilet paper, including toilet paper subscriptions. The company was founded in 2012 when its founders – Simon Griffiths, Jehan Ratnatunga and Danny Alexander – launched a crowdfunding campaign, hoping that they could supply good quality toilet paper and help with worldwide sanitation.
Who Gives a Crap’s signature issue is increasing toilet access. Two billion people globally don’t have access to sanitary toilets, equating to roughly 40 per cent of the world’s population. Around 289,000 children have died from sanitation-related diseases, according to company data. Who Gives a Crap donates 50 per cent of its profits to build toilets and improve sanitation infrastructure in the developing world.
3. The Big Issue
The Big Issue is a print and digital magazine that’s distributed widely in Australia. The magazine creates work opportunities for disadvantaged people by offering them the opportunity to sell the magazine. The Big Issue also has many other programs, such as Women’s Workforce and Classroom.
The Big Issue supports people by giving them low-barrier employment opportunities and a way to earn a meaningful income. People who work at the magazine come to it from many different circumstances, for example, long-term unemployment, substance dependency, family and relationship issues, mental illness, and intellectual and physical disability.
SEED is another Queensland-based social enterprise. It provides parks and commercial maintenance, including services such as cleaning, graffiti removal and vegetation management. SEED has important contracts with many organisations in the Brisbane area, including the Queensland State Government and the Brisbane City Council.
As a social enterprise, SEED focuses on providing employment and training opportunities for disadvantaged people, with the express aim of helping them upskill and secure long-term, meaningful employment. SEED’s profits are reinvested in delivering more employment opportunities.
5. The Bread & Butter Project
As Australia’s first social enterprise bakery, The Bread & Butter Project makes artisanal sourdough and other bakery products. Its products are stocked in many different stores in Australia, including Woolworths, Australia’s biggest supermarket.
The Bread & Butter Project invests its profits into helping those seeking asylum and refuge in Australia. Specifically, it creates training and employment opportunities for refugees and asylum seekers.
10 essential business management skills for social entrepreneurs
Creating a successful social enterprise takes hard work, dedication and a strong commitment to a social mission. However, it also requires many important business and management skills.
Here are 10 important business skills required for social entrepreneurs.
1. Understanding business models
A social enterprise is a business in that one of its goals is to make a profit. However, that isn’t the only reason that social enterprises exist.
Traditional corporate business models have three main components:
- Value proposition. This is the product or service that the business provides and will generate revenue.
- Operational model. How the company delivers said products or services to consumers.
- Value capture mechanism. The model under which the company generates and measures profit.
Social entrepreneurs must understand how social enterprise business models work. While there are similarities between social enterprise and corporate business models, social enterprise models differ in that rather than increasing revenue for business owners, they’ll be donating a significant portion of their profits to a social cause. An important business skill is understanding how to balance donations with the resources needed to help the business grow.
2. Creating an impactful vision and mission
Every business needs a vision and mission to bring employees together and to give them something to believe in. However, a social enterprise needs a special kind of vision that primarily puts people and the planet ahead of the pursuit of profit. This vision, or mission, is woven throughout the social enterprise and can show up in areas such as production, culture and employee and customer relationships.
Social entrepreneurs need to be skilled at understanding social and environmental issues and how their businesses can impact these issues. This includes selecting an appropriate focus issue, deciding how to communicate what they care about and executing a plan to make change.
3. Understanding business opportunities
Another critical business skill is to identify profitable business opportunities. After all, a social enterprise can’t make an impact if it can’t make a profit.
In an ever-changing and expanding marketplace, there are new opportunities for product and service innovation. To leverage these opportunities, social entrepreneurs need to be able to assess whether a market exists for the product or service and plan how they’ll manufacture, market, sell and distribute that product, while also fulfilling their social mission and vision. Social entrepreneurs who have a fundamental understanding of business opportunities, can then apply this understanding to guide their strategic decision-making.
4. Inspiring change
Ultimately, the vision and mission of any social enterprise will be about bringing about change, whether to promote equality, provide employment, create better environmental outcomes or solve a range of other problems. To do so, social entrepreneurs need to be able to inspire others.
They can achieve this in numerous ways, but ultimately it involves successful communication and establishing systems to create and sustain change over time.
5. Being resilient
Although being a social entrepreneur can be very fulfilling, it can have its challenges. Especially in the beginning, putting profits towards their mission may mean that less (or no) funding is left to reinvest in the business to ensure that it grows.
Many social issues that entrepreneurs care about are also complex and challenging and can’t be solved overnight (or even over many years). This means that a critical business skill for all social entrepreneurs is the ability to be resilient in the face of adversities, and have strategies prepared for possible disruption that may challenge business operations.
6. Being creative and innovative
To fulfil their vision and mission and make enough profit to function, social entrepreneurs need to be constantly creative and innovative in how they build and grow their business, and in how they try to approach their focus issue.
Solving social issues always involves thinking unconventionally. As the goal and methods behind each social enterprise are different, social entrepreneurs should think outside of the box to come up with creative solutions specific to their mission and business model.
7. Having high levels of social and emotional intelligence
Social entrepreneurs need to be able to genuinely connect with others, both internally and externally. This involves the important business skill of emotional and social intelligence. Being aware of others’ emotions and expressing their own can help promote meaningful relationships with others.
These relationships can help build up networks of stakeholders. This can help social entrepreneurs better achieve their mission and ensure that their companies remain profitable.
8. Being a strong and inspiring leader
Social entrepreneurs must be strong and inspiring leaders. This skill is crucial as entrepreneurs endeavour to not only drive social or environmental change but also run a profitable business.
Creating change involves encouraging others to reform their behaviour, so social entrepreneurs will have to be able to inspire and lead others.
9. Exhibiting optimism
While it may not be a traditional business skill, optimism is key to social entrepreneurship. Social entrepreneurs face considerable challenges, and optimism, or a high level of hope and confidence that their business (and social mission and vision) will succeed, can help inspire others and lead to positive outcomes.
Optimistic leaders inspire optimistic employees, and others in their network will be more likely to believe in their efforts to create change.
10. Having grit
Grit, or strength of character in the face of adversity, is essential for social entrepreneurs due to the dual challenges of having to run a profitable business and solve a social issue.
Grit is a combination of passion, hard work and the desire to persist despite obstacles. Grit is the ability to try again when something doesn’t work and to aim for positive change no matter what.
Tips for aspiring social entrepreneurs
There are many ways for aspiring social entrepreneurs to leverage their management skills in business. Here are some tips to consider when starting a social enterprise.
- Find the issue you want to address. Your business mission will likely be in response to an issue that needs solving. You should consider how your social enterprise will work towards addressing and resolving that issue.
- Identify similar social enterprises. Consider whether or not other social enterprises exist that have similar methods or missions. If so, can your business collaborate with them?
- Establish sources of funding. Social enterprises can receive funding from a variety of sources. You should decide if you want to pursue grants, investments, community donations or other forms of funding.
- Determine staffing and stakeholders. Who will run your business, and will it have staff? How many internal and external stakeholders will you need, and how will you find them?
How to improve management skills in business
Leading a successful social enterprise and making positive change in the world can be the most fulfilling and exciting role aspiring entrepreneurs ever pursue. However, doing so requires the right set of skills. Future social entrepreneurs should invest in improving their management skills in business to maximise their chance for success.
The online Master of Management at UNSW helps prepare the next generation of social entrepreneurs. In courses such as Law, Regulation, and Ethics and Strategies for Disruption, students learn the foundations of socially responsible business. Conducted fully online in as little as two years, UNSW’s Master of Management offers advanced expertise from a global top 20 university. Take the first step to a more responsible world.